GAME enter administration: What went wrong?

Share

Struggling high-street videogame retailer GAME have now officially filed for administration. The company have released the following statement:

“Further to this morning’s announcement of the suspension of trading in shares of GAME Group plc, the board has concluded that its discussions with all stakeholders and other parties have not made sufficient progress in the time available to offer a realistic prospect for a solvent solution for the business.
“The board has therefore today filed a notice of intention to appoint an administrator.

“In the short term, the Board’s intention is that the business will continue to trade and discussions with lenders and third parties will continue under the protection of the interim moratorium.”

The news follows GAME’s earlier request to be removed from the London Stock Exchange, which now throws into doubt the long-term health of the chain’s GAME and sister-store GameStation outlets.

So what went wrong for GAME, and why have they struggled to make cash while the videogame industry has experienced what some analysts are referring to as a new Golden Age. We list a few of the company’s problems below.

Online Competition:

Ask any gamer why GAME has struggled and they’ll point to one fact: high prices. GAME’s products were always priced at the higher end of RRP suggestions. Compare this to the likes of Amazon and Play.com, who regularly shave a good £10 off of launch day prices compared to GAME (with free delivery too, no less), and it seems obvious where gamers are going to spend their money.

Why head over to a GAME store that’s sure to be more expensive when you can get a cheap deal on Amazon without even leaving your house? Even the GAME website was a bit clunky and difficult to navigate, which surely didn’t help their online fortunes.

But it was a vicious cycle for GAME; unable to cut comfortable credit deals with games publishers, they were forced to keep prices high in order to stand a chance of turning a profit on them. Factor in the cost of running physical brick-and-mortar stores compared to the remote warehouses of web retailers and the writing was on the wall really. It seems consumers just headed to online rivals instead.

Rival Exchange Stores:

GAME offer trade-in deals for gamers looking to ditch their dusty old titles in favour of brand new ones. On paper it sounds like a great deal, but a number of rivals have grown over the past few years, again making GAME’s offering seem like a bit of a raw deal.

Take rival high-street store CEX, who trade solely in second hand titles. From our experience, on average you’ll get between £5 and £10 more worth of cash than GAME if you trade in a brand new title, and even more again if you’re willing to take store credit. The likes of CEX and Cash Converters also don’t solely stock games; you could trade in Modern Warfare 3 and get a fair few quid off of a digital camera, PC, DVD or Blu-ray, smartphone or innumerable other electrical items in their stores.

Similarly, GAME’s pre-owned titles tend to be more expensive than rivals.

This is all without even mentioning eBay, where buyers have a massive stock of pre-owned titles to browse that stretch back decades to long-unsupported platforms, and sellers have complete control over how much their precious games are worth.

Poor PC Gaming Support:

Head into a GAME store and (aside from more recent stock issues that saw titles like Mass Effect 3 notably absent from shelves) you’ll be met with a strong showing of games lining the walls.

That is, so long as you’re a console or handheld gamer. For many years GAME have whittled down the amount of store space dedicated to PC gaming. It’s ridiculous considering that a) they’re the single dedicated high-street gaming retailer, and should be the first physical port of call for all gamers regardless of platform, and b) that 2011 saw an unprecedented resurgence in interest in PC gaming thanks to titles like Minecraft, Skyrim, The Old Republic and StarCraft II.

Again, it seems to come down to competition. Digital download platforms like Steam now do a thriving trade selling PC games, and as a result are regularly able to launch incredibly tempting sales. However, Steam’s success was only made possible as they filled a gap in the market; a gap left when retailers like GAME stopped serving the needs of PC gamers.Supermarkets:

A few years ago many wouldn’t have expected to put ASDA, Tesco and Sainsbury’s down as a rival to GAME, but it’s very much the reality now. With lower margins, the big supermarket chains (while not stocking nearly as wide a spread of games as GAME) can cut the prices of AAA releases massively. The convenience of doing the weekly shop and treating yourself to a game for the weekend is obvious, and something that the supermarkets are clearly aware of, tapping into the rise of the “casual” gamer.

New Digital Distribution Methods:

As fast broadband connectivity continues to spread across the nation, so too does the prevalence of digital download platforms for all sorts of media. Gaming is no different. The Xbox 360 has the Xbox Live Arcade; the PlayStation 3 has the Sony Entertainment Network; the Nintendo Wii has the Wii Shop Channel; PC gamers look to Steam and Gamefly.

In many cases, these platforms hold exclusive titles that can’t be bought in store (such as the indie games, which are growing massively in popularity), and while not always cheap (with the exception of Steam), they more-or-less match GAME’s in-store prices when it comes to downloads of retail games. While some gamers are still wary about not owning physical copies or their games, those fears will erode as the concepts become more familiar.

Again, the convenience of buying a game from the comfort of a couch will eventually win out over visiting a store.

Mobile Gaming Is On The Rise:

Whether you’re an Android, Windows Phone 7 or (more likely) an iOS iPhone, iPad or iPod touch owner, chances are you’ve got a fair few games stored on your mobile device. Apple have made the concept of the “app” a simple and welcoming one, and gaming has been at the heart of the format’s success. Offering bitesize chunks of gaming fun at pocket-money prices, they attract casual and hardcore gamers alike, and again benefit from the convenience of digital distribution. With these platforms closed to the benefit of Apple, Microsoft and Google’s coffers, it’s practically impossible for GAME to gain any ground here.

We’re In The Middle Of A Recession:

An obvious one but pertinent nonetheless. We’re in the middle of a recession, and everyone has less cash to spend on luxuries, which videogames ultimately are. If it’s a choice between a meal and rent payments or an Xbox 360, it’s pretty obvious which choice people are going to make.

Any high street retailer is going to struggle with the high overheads involved especially when your customer base is internet savvy. This is particularly true when landlords would rather have properties sitting empty than renegotiate rentals downward.